The move from 2002 to 2007 is rather clearly three waves; I'd be hard-pressed to find a way to interpret it as a 5-wave move.
In this case it might be wise to interpret it relative to inflation. From 1970 to the present, I use the wonderful calculator found at Political Calculations to determine the monthly close and Consumer Price Index (CPI) for that month. Yes, CPI is not without its flaws - but as it if anything underestimates inflation, for our purposes it will work perfectly well.
StockCharts, which I use to make my charts, of course does not have a CPI graph, nor a graph of Producer Price Index (PPI) or any other index of inflation (other than gold, if you're that type of person). So I had to manually make it in Excel, but that wasn't a problem.
Notice actually how well it is channeling. The black lines, which connect the 2000/07 highs and the 2003/09 lows, are parallel.
One could interpret this as the Prechterian P[2] - this wave count would still be valid here (and is still technically valid on the nominal SPX). However, it would mesh more effectively with other indices if we called it a D wave of what in the nominal SPX is a descending triangle. Which means we should, at some point, rally up to its top. It may take us until the red line reaches the black, but not necessarily. Or we could rally up to the red line and then decline in E.
If we rally to the upper channel line this year, this would equate to about 6.60-6.70 in the SPX/CPI. The June 2012 CPI is 229.478, so if we assume it will be around 230 (with the economy slowly slip-sliding back into recession, it probably won't move all that much), this equates to SPX 1518-1541. This is for a monthly close, so it's not altogether unreasonable we may see a new all-time high of ~1600, which is where you would find yourself if you drew the equivalent upper trendline from the 2000 and 2007 nominal SPX highs (log or linear scale).
If 1600, then, is sustainably breached and inflation remains low, we're probably in a new secular bull market. If it is sustainably breached and inflation is high, then odds are in favor that we're going to be in a period of high sustained inflation, probably hyperinflation.
The disadvantage (or, if you want to see it that way, advantage) of this count is that it cannot be invalidated until after getting below the 2009 666.70 low, or sustainably above the black line in SPX/CPI.
But there's a catch. Typically, but not necessarily, either the B or D wave of such a triangle is tricky, and all things considered the B wave was a straightforward housing bubble. So if this move from 2009 is the D wave, and it certainly seems difficult to count... what's next?
Well, that's a subject for Part III.
